Latest Federal Court Cases, 1/14/19

Overview

In the continuing saga between WesternGeco and ION Geophysical, a Federal Circuit panel addressed lost profits on remand from the Supreme Court’s decision last year. See our write-up of the June 2018 Supreme Court decision here. The Supreme Court had held “that WesternGeco’s damages award for lost profits was a permissible domestic application of [35 U.S.C.] § 284.” By the time the case came back to the Federal Circuit, the Patent Trial and Appeal Board had invalidated four of the six asserted patent claims, as we discussed here. Of the two claims that survived, only one supported the lost profits award. Accordingly, on remand, the issues before the Federal Circuit were: “(1) the impact of the intervening invalidation of four of the six asserted patent claims on the fully paid reasonable royalty award, and (2) the impact of the invalidation of the four claims on the lost profits award and ION’s argument (presented in its original appeal) that ‘Panduit cannot be satisfied because ION and [WesternGeco] do not compete in the marketplace.’”

With respect to the first issue, ION argued that the calculation of the reasonable royalty according to the Georgia-Pacific factors was affected by the invalidation of four of the six asserted claims. In support of its argument, ION relied upon Fresenius USA, Inc. v. Baxter International, Inc., 721 F.3d 1330 (Fed. Cir. 2013) “as holding that a judgment cannot be final for purposes of intervening patent invalidations if any part of the litigation remains pending, and that here the lost profits award continues to be litigated and is not final.” However, the Court disagreed with ION’s position. It found that Fresenius applies only in cases where the judgment is not final. Here, the Court found that the parties had entered into an agreement that fully resolved all issues with the exception of lost profits. Consequently, it held that “ION cannot now reopen the agreed and fully paid unappealable final judgment on the reasonable royalty based on the subsequent invalidation of a subset of asserted patent claims.”

On the second issue, ION argued that the Court should find that lost profits are unrecoverable or remand for a new trial. ION argued that it and WesternGeco were not competitors because ION sells devices and WesternGeco sells surveys. However, the Federal Circuit disagreed, finding that “there was sufficient evidence in the record for the jury to conclude that the products did compete—i.e., that consumers in the surveying market (oil companies) considered WesternGeco’s Q-Marine device and ION’s DigiFin device to be substitutes for their surveying needs (i.e., that the products competed in the same market).” However, the Court did acknowledge that the fact that ION sells devices and WesternGeco sells surveys may be relevant to the computation of the lost profits. In particular, the Court referred to its previous decision in Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014) that held “apportionment is required even for nonroyalty forms of damages.” Here, the apportionment argument was found to have been waived, but could be raised in the event that the District Court orders a new trial on damages.

Ion also argued that the lost profits award could not be sustained in light of the subsequent invalidation of four of the six asserted patents, and the fact that only one patent claim remained that could support the lost profits award. Here, the jury rendered a single verdict and did not make its award based on infringement of separate claims. The Court noted the general rule “that when a ‘jury was told it could rely on any of two or more independent legal theories, one of which was defective,’ the general verdict must be set aside.” However, it did not find that a new trial was automatically required so long as the record showed that there was no dispute that the technology covered by the remaining valid claim was required to sustain a lost profits award. The Court remanded this issue to the District Court because the record was inadequate on this point and because the District Court was in a better position to determine whether a new trial was required. In doing so, it explicitly advised that a new trial on lost profits could only be denied if it is established at trial that the relevant claim “covers technology necessary to perform the surveys upon which the lost profits award is based.”

The Court affirmed a decision of the Patent Trial and Appeal Board (PTAB) ruling claims of a patent unpatentable. The PTAB had initially instituted review on two of three grounds. After a final written decision finding some but not all claims to be unpatentable, Petitioners moved for reconsideration on the third petitioned ground, which the PTAB granted. After additional briefing and submission of evidence, the PTAB found that Petitioner had shown the remaining claims to be unpatentable. On appeal, the Patent Owner argued that the Board had exceeded its statutory authority and violated its due process rights when it invalidated claims based on a ground that the PTAB did not institute in its original institution decision. The Court found that the Supreme Court’s decision in SAS Inst. Inc. v. Iancu—holding that PTAB must institute on all grounds petitioned or not at all—foreclosed appellant’s argument that PTAB exceeded its statutory authority, and held that no due process violation had occurred. The Court also affirmed the Board’s claim construction, anticipation, and obviousness rulings on the merits.

In this appeal from an inter partes review, the Federal Circuit affirmed the PTAB’s decision to invalidate a patent as obvious over certain prior art. The Court first addressed whether the PTAB erred in determining a person of ordinary skill in the art would have been motivated to combine the teachings of two references: the first a patent that taught all elements of the asserted claims, and the second a well-known textbook that provided more explicit teachings. In holding the PTAB did not err, the Court explained that because all elements of the claims were disclosed by a single reference, the PTAB was not required to address whether there was a motivation to combine. Moreover, the additional reference was not relied upon for disclosure of any elements or teachings—it was beneficial to better understand or interpret what the first reference disclosed.

The Court also addressed whether the PTAB erred in failing to construe a term. The Court held there was no error because no construction was necessary.

The Federal Circuit affirmed the PTAB’s inter partes review holding that patent claims were not unpatentable as obvious. The patent claims related to chemical compounds used to formulate an antimuscarinic drug used to treat urinary incontinence. The Court first held that Amerigen had appellate standing because the asserted patent blocked Amerigen’s launch of its tentatively approved drug, and invalidation of the patent would advance the drug’s launch. On the merits, the Federal Circuit held that substantial evidence supported the PTAB’s finding that a skilled person would not have been motivated to modify the compound.